The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, have been surging.
While oil’s rapid rebound has drawn plenty of concern and calls for a near-term pullback, other market observers see more upside on the way for crude, particularly as supply disruptions and the U.S. summer driving season kick in.
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Some of the world’s largest producers continue to pump crude at record levels, with the Organization of Petroleum Exporting Countries maintaining Saudi Arabia’s strategy of squeezing out high-cost competitors.
“West Texas Intermediate crude futures for July were trading above $51 per barrel for the first time since July 2015. Crude was higher on the weaker dollar, continued supply disruptions and as U.S. government data showed a drawdown in the nation’s inventories,” reports CNBC. “Some of the factors driving the price higher may be fleeting, and oil is widely expected to come off current levels. But strategists say the charts are telling another story.”
Nevertheless, fundamentals are improving in the energy market. For example, U.S., India and other major consumers are seeing increased demand, the Wall Street Journal reports. On the supply side, U.S. shale production has fallen off in response to the collapsed prices, and producers like Nigeria and Canada have experienced disruptions.